Record low general and administrative expenses of $2.94 per barrel, a 21% reduction from the third quarter of 2015;

Reduced 2016 non-energy operating cost guidance to $5.75 to $6.50 per barrel, approximately 16% below the original estimate of $6.75 to $7.75 per barrel;

The 2016 capital program has been revised downwards to $140 million from the original budget of $328 million, while maintaining production guidance;

Solid financial liquidity, exiting the quarter with $103 million of cash and cash equivalents and an undrawn US$2.5 billion revolving credit facility.

“Our quarterly results are a demonstration of MEG’s increasing capacity to sustain the company in a challenging commodity price environment, through continued technological advancement and reductions in our overall cost base,” said Bill McCaffrey, President and Chief Executive Officer. “We are seeing record low per barrel non-energy operating and general and administrative costs. These cost reductions were supported by third quarter production levels which are the second best in MEG’s history.”

MEG recorded production of 83,404 bpd in the third quarter of 2016, compared to production of 82,768 bpd in the third quarter of 2015. MEG expects to meet its 2016 production guidance of 80,000 to 83,000 bpd.

Related net operating costs for the third quarter were $7.76 per barrel compared to $9.10 per barrel in the third quarter of 2015. Non-energy operating costs (which exclude natural gas consumption) were $5.32 per barrel, an 11% improvement from the same period in 2015. The significant decrease in net operating costs reflects the ongoing efficiency gains from the application of eMSAGP, which is being fully deployed across the company’s Phase 2 operations. Net operating costs also benefited from a decrease in the usage and cost of natural gas used to fuel the company’s SAGD facilities. MEG’s steam to oil ratio (SOR) averaged 2.2 during the third quarter of 2016, compared to an SOR of 2.5 for the third quarter of 2015.

High production volumes and low operating and general and administrative costs contributed to cash flow from operations of $23 million for the third quarter of 2016, despite the current commodity price environment. Cash flow from operations was relatively stable from $24 million in the third quarter of 2015.

MEG recognized an operating loss of $88 million for the third quarter of 2016, compared to an operating loss of $87 million in the same period of 2015.

At the end of the third quarter, MEG had $103 million of cash and cash equivalents on hand. At current strip prices, MEG anticipates its US$2.5 billion revolving credit facility will remain undrawn at the end of 2016.

Capital investment for the third quarter totaled $19 million, bringing total capital invested for 2016 to date to $74 million. As a result of the ongoing efficiency gains achieved through the application of eMSAGP, MEG anticipates it will achieve its sustaining and maintenance, marketing and other initiatives in 2016 with an investment of $140 million, 18% below the reduced capital investment of $170 million announced in April.

“We are continuing to make incremental reductions in costs across the business,” says McCaffrey. “Our advances in technology have enabled MEG to increase production while reducing our capital and operating costs.”

Operational and Financial Highlights

The following table summarizes selected operational and financial information of the Corporation for the periods noted. All dollar amounts are stated in Canadian dollars ($ or C$) unless otherwise noted:

Nine months endedSeptember 30

2016

2015

2014

($ millions, except as indicated)

2016

2015

Q3

Q2

Q1

Q4

Q3

Q2

Q1

Q4

Bitumen production – bbls/d

81,065

78,849

83,404

83,127

76,640

83,514

82,768

71,376

82,398

80,349

Bitumen realization – $/bbl

24.91

33.20

30.98

30.93

11.43

23.17

31.03

44.54

25.82

50.48

Net operating costs – $/bbl(1)

7.89

9.69

7.76

7.43

8.53

8.52

9.10

9.43

10.49

10.13

Non-energy operating costs – $/bbl

5.83

6.84

5.32

5.81

6.45

5.66

5.98

7.01

7.57

6.42

Cash operating netback – $/bbl(2)

10.18

18.01

16.74

16.09

(3.71

)

9.05

16.41

29.64

9.83

35.56

Cash flow from (used in) operations(3)

(102

)

94

23

7

(131

)

(44

)

24

99

(30

)

134

Per share, diluted(3)

(0.45

)

0.42

0.10

0.03

(0.58

)

(0.20

)

0.11

0.44

(0.13

)

0.60

Operating earnings (loss)(3)

(383

)

(234

)

(88

)

(98

)

(197

)

(140

)

(87

)

(23

)

(124

)

8

Per share, diluted(3)

(1.70

)

(1.04

)

(0.39

)

(0.43

)

(0.88

)

(0.62

)

(0.39

)

(0.10

)

(0.56

)

0.04

Revenue(4)

1,301

1,481

497

513

290

445

460

555

467

615

Net earnings (loss)(5)

(124

)

(872

)

(109

)

(146

)

131

(297

)

(428

)

63

(508

)

(150

)

Per share, basic

(0.55

)

(3.89

)

(0.48

)

(0.65

)

0.58

(1.32

)

(1.90

)

0.28

(2.27

)

(0.67

)

Per share, diluted

(0.55

)

(3.89

)

(0.48

)

(0.65

)

0.58

(1.32

)

(1.90

)

0.28

(2.27

)

(0.67

)

Total cash capital investment(6)

74

203

19

20

35

54

32

90

80

324

Cash and cash equivalents

103

351

103

153

125

408

351

438

471

656

Long-term debt

4,910

5,024

4,910

4,871

4,859

5,190

5,024

4,678

4,759

4,350

Net operating costs include energy and non-energy operating costs, reduced by power revenue.

Cash flow from (used in) operations, Operating earnings (loss) and the related per share amounts do not have standardized meanings prescribed by IFRS and therefore may not be comparable to similar measures used by other companies. For the three and nine months ended September 30, 2016 and September 30, 2015, the non-GAAP measure of cash flow from (used in) operations is reconciled to net cash provided by (used in) operating activities and the non-GAAP measure of operating loss is reconciled to net loss in accordance with IFRS under the heading “NON-GAAP MEASURES” and discussed further in the “ADVISORY” section.

The total of Petroleum revenue, net of royalties and Other revenue as presented on the Interim Consolidated Statement of Earnings (Loss) and Comprehensive Income (Loss).

Includes a net unrealized foreign exchange loss of $38.7 million and a net unrealized foreign exchange gain of $267.8 million on the Corporation’s U.S. dollar denominated debt and U.S. dollar denominated cash and cash equivalents for the three and nine months ended September 30, 2016, respectively. The net losses for the three and nine months ended September 30, 2015 include net unrealized foreign exchange losses of $330.5 million and $626.3 million, respectively.

MEG prepares its financial statements in accordance with International Financial Reporting Standards (“IFRS”) and presents financial results in Canadian dollars ($ or C$), which is the Corporation’s functional currency.

Non-GAAP Financial Measures

This document includes references to financial measures commonly used in the crude oil and natural gas industry, such as cash flow from (used in) operations and operating earnings (loss). These financial measures are not defined by IFRS as issued by the International Accounting Standards Board and therefore are referred to as non-GAAP measures. The non-GAAP measures used by MEG may not be comparable to similar measures presented by other companies. MEG uses these non-GAAP measures to help evaluate its performance. These non-GAAP measures should not be considered as an alternative to or more meaningful than net cash provided by (used in) operating activities or net earnings (loss), as determined in accordance with IFRS, as an indication of MEG’s performance.

Cash Flow from (Used in) Operations

Cash flow from (used in) operations is a non-GAAP measure utilized by the Corporation to analyze operating performance and liquidity. Cash flow from (used in) operations excludes the net change in non-cash operating working capital, net change in other liabilities, contract cancellation recovery and decommissioning expenditures, while the IFRS measurement “net cash provided by (used in) operating activities” includes these items. Cash flow from (used in) operations is reconciled to net cash provided by (used in) operating activities in the table below.

Three months ended September 30

Nine months ended September 30

($000)

2016

2015

2016

2015

Net cash provided by (used in) operating activities

$

(19,894

)

$

(5,188

)

$

(175,978

)

$

99,631

Adjustments:

Net change in non-cash operating working capital items

45,492

28,887

76,409

(1,594

)

Net change in other liabilities

(2,995

)

–

(3,100

)

–

Contract cancellation recovery

–

–

–

(5,880

)

Decommissioning expenditures

99

178

1,095

1,429

Cash flow from (used in) operations

$

22,702

$

23,877

$

(101,574

)

$

93,586

Operating Loss

Operating loss is a non-GAAP measure which the Corporation uses as a performance measure to provide comparability of financial performance between periods by excluding non-operating items. Operating loss is defined as net loss as reported, excluding unrealized foreign exchange gains and losses, unrealized gains and losses on derivative financial instruments, unrealized gains and losses on risk management, contract cancellation recovery, onerous contracts and the respective deferred tax impact of these adjustments. Operating loss is reconciled to “net loss”, the nearest IFRS measure, in the table below.

Three months ended September 30

Nine months ended September 30

($000)

2016

2015

2016

2015

Net loss

$

(108,632

)

$

(427,503

)

$

(123,968

)

$

(872,396

)

Adjustments:

Unrealized net loss (gain) on foreign exchange(1)

38,729

330,478

(267,763

)

626,301

Unrealized loss (gain) on derivative financial instruments(2)

(11,367

)

6,807

(5,362

)

2,600

Unrealized gain on risk management(3)

(32,207

)

–

(11,736

)

–

Contract cancellation recovery

–

–

–

(5,880

)

Onerous contracts expense(4)

18,057

–

31,483

–

Deferred tax expense (recovery) relating to these adjustments

7,491

3,449

(5,763

)

15,235

Operating loss

$

(87,929

)

$

(86,769

)

$

(383,109

)

$

(234,140

)

Unrealized net foreign exchange gains and losses result from the translation of U.S. dollar denominated long-term debt and cash and cash equivalents using period-end exchange rates.

Unrealized gains and losses on derivative financial instruments result from the interest rate floor on the Corporation’s long-term debt and interest rate swaps entered into to effectively fix a portion of its variable rate long-term debt.

Unrealized gains or losses on commodity risk management contracts represent the change in the mark-to-market position of the unsettled commodity risk management contracts during the period.

This document may contain forward-looking information including but not limited to: expectations of future production, revenues, expenses, cash flow, operating costs, steam-oil ratios, pricing differentials, reliability, profitability and capital investments; estimates of reserves and resources; the anticipated reductions in operating costs as a result of optimization and scalability of certain operations; and the anticipated sources of funding for operations and capital investments. Such forward-looking information is based on management’s expectations and assumptions regarding future growth, results of operations, production, future capital and other expenditures, plans for and results of drilling activity, environmental matters, business prospects and opportunities.

By its nature, such forward-looking information involves significant known and unknown risks and uncertainties, which could cause actual results to differ materially from those anticipated. These risks include, but are not limited to: risks associated with the oil and gas industry, for example, the securing of adequate supplies and access to markets and transportation infrastructure; the availability of capacity on the electricity transmission grid; the uncertainty of reserve and resource estimates; the uncertainty of estimates and projections relating to production, costs and revenues; health, safety and environmental risks; risks of legislative and regulatory changes to, amongst other things, tax, land use, royalty and environmental laws; assumptions regarding and the volatility of commodity prices, interest rates and foreign exchange rates, and, risks and uncertainties related to commodity price, interest rate and foreign exchange rate swap contracts and/or derivative financial instruments that MEG may enter into from time to time to manage its risk related to such prices and rates; risks and uncertainties associated with securing and maintaining the necessary regulatory approvals and financing to proceed with MEG’s future phases and the expansion and/or operation of MEG’s projects; risks and uncertainties related to the timing of completion, commissioning, and start-up, of MEG’s future phases, expansions and projects; and the operational risks and delays in the development, exploration, production, and the capacities and performance associated with MEG’s projects.

Although MEG believes that the assumptions used in such forward-looking information are reasonable, there can be no assurance that such assumptions will be correct. Accordingly, readers are cautioned that the actual results achieved may vary from the forward-looking information provided herein and that the variations may be material. Readers are also cautioned that the foregoing list of assumptions, risks and factors is not exhaustive.

Further information regarding the assumptions and risks inherent in the making of forward-looking statements can be found in MEG’s most recently filed Annual Information Form (“AIF”), along with MEG’s other public disclosure documents. Copies of the AIF and MEG’s other public disclosure documents are available through the SEDAR website which is available at www.sedar.com.

The forward-looking information included in this document is expressly qualified in its entirety by the foregoing cautionary statements. Unless otherwise stated, the forward-looking information included in this document is made as of the date of this document and MEG assumes no obligation to update or revise any forward-looking information to reflect new events or circumstances, except as required by law.

A conference call will be held to review the financial results at 8:30 a.m. Mountain Time (10:30 a.m. Eastern Time) on Thursday, October 27, 2016. The U.S./Canada toll-free conference call number is 1 866-225-0198. The international/local conference call number is 416-340-2218.

MEG Energy Corp. is focused on sustainable in situoil sands development and production in the southern Athabasca oil sands region of Alberta, Canada. MEG is actively developing enhanced oil recovery projects that utilize SAGD extraction methods. MEG’s common shares are listed on the Toronto Stock Exchange under the symbol “MEG.”